U.S. stock futures pointed to a sharp drop at the open on Wednesday, with traders heading for the exit after the Trump administration said it will slap tariffs on a further $200 billion in Chinese goods.

What are markets doing?

Futures for the Dow Jones Industrial Average YMU8, -0.92% slumped 234 points, or 0.9%, to 24,694, while those for the S&P 500 index ESU8, -0.82% dropped 23.20 points, or 0.8%, to 2,773.50. Futures for the Nasdaq-100 index NQU8, -0.98% fell 70.50 points, or 1%, to 7,230.75.

The potential for a selloff comes after the Dow DJIA, +0.58% scored its longest winning run in a month on Tuesday, ending up 0.6%. The S&P 500 ESU8, -0.82% closed 0.4% higher, while the Nasdaq Composite Index COMP, +0.04% finished up less than 0.1%.

What is driving the markets?

The gains on Tuesday came as Wall Street shifted attention to enthusiasm over upcoming second-quarter earnings results and put concerns over global trade wars on the back burner.

However, the issue of trade was back in the limelight on Wednesday after the White House late Tuesday said it would assess 10% tariffs on a further $200 billion in Chinese goods. The move is seen as deepening the rift with Beijing and sending a message to other trading partners that the U.S. won’t back down in a trade fight. The U.S. last week hit Beijing with levies on $34 billion in goods, and Beijing retaliated with tariffs of the same amount.

A final decision on the products to be hit with the new tariffs is expected after a consultation period in late August.

China’s Ministry of Commerce said in a statement that the new levies are “totally unacceptable” and that the behavior is hurting not just China, but the whole world.

What are analysts saying?

“The usual moves in this [trade dispute] scenario have been for global yields to fall, the yen and U.S. dollar to be preferred in the currency markets, and equities to correct and all these factors happened in a knee-jerk reaction overnight,” said Richard Perry, market analyst at Hantec Markets, in a note.

“It will be interesting to see how far this negative move goes, as the shock impact seems to be lessening every time these trade tariff shocks are announced. The yen strength has been limited (so far) this time around, and even the dollar does not seem to be getting too much traction as markets become more desensitized to the fears. Will this be able to sustainably push for renewed dollar strength again? Not yet,” he added.

What are other markets doing?

The ICE U.S. Dollar Index DXY, +0.25% rose 0.1% to 94.206, while the yen USDJPY, +0.18% was mixed. The buck bought ¥111.03, up from ¥111.00 late Tuesday in New York.

Asian markets closed mostly lower in reaction to the tariff news, with the Shanghai Composite SHCOMP, -1.76% sliding by 1.8%. European stocks SXXP, -1.20% also opened firmly in the red.

Oil prices CLQ8, -1.01% and gold prices GCQ8, -0.37% both dropped.

What’s on the economic calendar?

The producer-price index for June is due at 8:30 a.m. Eastern Time, followed by data on wholesale inventories from May at 10 a.m.

Among Federal Reserve speakers, New York Fed President John Williams will give a speech on the economy to Brooklyn Town Hall at the Brooklyn Law School at 4:30 p.m. Eastern.

Which stocks are in focus?

Shares of 21st Century Fox Inc.FOXA, +0.42% could be active after the media company significantly lifted its offer price to takeover Sky PLCSKY, -0.50% . The move is heating up a bidding war with Comcast Corp.CMCSA, -0.66% , which is also interested in buying the British broadcaster. Comcast shares were down 0.8% ahead of the bell on Wednesday.

Shares of Nvidia Corp.NVDA, +1.60% dropped 1.8% in premarket action after the tech company late Tuesday announced a partnership with German car maker Daimler AGDAI, -1.56% and auto-parts giant Bosch Ltd. to test robot taxis in California.

Facebook Inc.FB, -0.59% was down 1.1% before the open after confirming late Tuesday it could be fined about $660,000 by a U.K. regulator over the Cambridge Analytica scandal.

Fastenal Co.FAST, -0.18% rose 1% premarket after the company late Tuesday said its board raised the quarterly dividend to 40 cents a share from 37 cents a share. The fastener manufacturer is slated to report quarterly earnings ahead of Wednesday’s open.